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Before Spotify Enters, Russian Streaming Music Service Closes $20M Series A

Hold up, Spotify. Russia already has a free, legal music streaming service, and now it has the funding to further support its ecosystem of apps, social media integrations and a growing network.

Zvooq announced today that it raised $20 million in a Series A round led by Ulmart, Russia’s online electronic retailer that rivals Amazon, and private equity fund Essedel Capital.

With over 15 million songs and 500,000 artists, Zvooq offers free streaming with ads, a subscription model, curated playlists and a music store. Essentially, it’s a combination of Spotify and iTunes.

But unlike those platforms, Zvooq breaks up its offerings into single-use apps — a popular shift we’ve seen recently by Facebook and Foursquare. Fonoteka allows you to listen by album; Waves is an algorithm-filled playlist creator; Playlist of the Day offers themed playlists; Rus Fanatic is for connecting with Russian artists; and then there’s the all-inclusive Zvooq app.

“We have slim and narrow applications that work with different listening habits. Instead of having a one-size-fits-all model we have multiple services,” said Zvooq’s cofounder Victor Frumkin.

They’re all funded by advertisement spots or a paid subscription to Zvooq, priced at 199 roubles or about $5 per month. Only a few months out of beta testing, Zvooq boasts 2.7 million registered users across all application, with 10% as monthly subscribers

Zvooq isn’t the first streaming service in the Russian market, however. Local services Yandex and Trava, and global companies iTunes and Deezer all operate within it. They’re all trying to tap into one of the largest markets of online piracy and have recently been able to gain more traction thanks to Russia’s 2013 anti-piracy law that later expanded to music.

The anti-piracy push has continued to build, most recently in court with Sony Music Russia, Universal Music Russia, and Warner Music UK suing Russia’s social networking site VKontakte, BBC reported. Currently on VKontakte, users can upload songs to their profile pages and easily transfer them to friends without licensing.

Zvooq, which serial entrepreneurs Frumkin and cofounder Simon Dunlop began developing in 2010, is after that same market. In addition to their collection of apps, they’ve made their platform easy to integrate into social networks. Zvooq is already the default music player on Facebook in Russia, and Frumkin confirmed that his company has been in negotiations with VKontakte.

Frumkin didn’t seem worried about the potential arrival of Spotify to Russia and identified Zvooq’s main competition as piracy.

“We can welcome music services,” Frumkin said. “For us, it’s good since it raises awareness about music services in general. It’s a plus for us because we have a complementary if not a very compelling offering.”

Zvooq’s target audience is the casual listener in which Frumkin said he sees the narrowed apps as providing a service. They’ve done well to personalize to the Russian market as well with the Rus Fanatic app that allows local artists to have their own profile page and interactions with fans.

The company’s also locked down what Frumkin identified as the biggest challenge — navigating the Russian market. While their core market is Moscow and St. Petersburg, Frumkin said that they worked to develop their app in other regions where coverage can be spotty and there’s less smartphone ownership.

So what’s in store for the $20 million? The company has already been working to secure partnerships with mobile operators for having pre-installed apps and subscription promotions. They’re also increasing their music sales by operating through Ulmart’s e-commerce platform.

Aside from Russia, Zvooq is currently operational in Ukraine, Belarus, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Georgia, Armenia and Azerbaijan. While continuing to grow there, Frumkin said Zvooq is expecting to launch in other eastern European markets within the year.

“[The expansion] involves additional clearing rights with international music labels and connecting with the local music. We’re very focused on having local artists represented,” Frumkin said.

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